Sec 44ada - presumptive taxation for professionals

Tax queries 715 views 9 replies

Ashish Chawla

PCS

169 Points Joined October 2009

Respected Professionals,

Greetings. I am a practicing company secretary and have my own registered partnership firm. My query regarding the above mentioned subject is as follows:

1. From what I understand sec 44ADA is scheme and one can choose to opt for it or not. Whether what I have interpreted is right or not as I do not intend to declare 50% as profits? Also if we have to opt for 44ADA we have not paid advance tax so what should be done in this scenario?

2. Firms gross total receipts do not exceed Rs. 10 Lacs. As per sec 44AA we need to maintain books of accounts which is not a problem as being a professional we follow cash system. Futher as per sec 44AB(b) our turnover does not exceed Rs. 50 Lakhs hence mandatory tax audit is not applicable to us. In this scenario do we still have to get audit done as we would be showing our profits below 50% of gross receipts?

3. Which ITR would we be required to file and what would be the due date of filing the firms as well as partners returns?

Hope to get some clarity on this.

Thanks and Regards,

Ashish Chawla.

Replies (9)

neeraj gupta

1138 Points Joined March 2017

1. yes it is your choice

2. Audit is required if you are showing profits below 50% and total income above 2.5L. 44AB(d) will kick in.

3. Use ITR 3

Ref: 44AB (d)

(d) carrying on the 34[profession] shall, if the profits and gains from the 34[profession] are deemed to be the profits and gains of such person under 35[section 44ADA] and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his 34[profession] and his income exceeds the maximum amount which is not chargeable to income-tax in any 36[previous year; or]

Ashish Chawla

PCS

169 Points Joined October 2009

Hi Neeraj,

Thank you for replying. Futher to the above query what if we do not opt for presumptive scheme and show 20% profits under regular scheme having maintained books of accounts will we still have to get audit done?

Thanks & Regards,

Ashish Chawla.

RAJA P M

"Do the Right Thing...!!!"

128147 Points Joined January 2015

Yes. You can show 20% profit in ITR 3 and get audit your accounts. Already you have books of accounts so you don't no more risks.
(ITR 3 is best)

Ashish Chawla

PCS

169 Points Joined October 2009

20% of Rs. 10 Lakhs would amount to Rs. 2 lakhs which would be below the maximum limit and hence 44AB(d) would not be applicable and hence audit wont be applicable right? There are 2 conditions profits lower than 50% and income above maximum limit.

ITR 3 would have to be filed for partners. Which ITR should be filed for the firm?

neeraj gupta

1138 Points Joined March 2017

Yes that is correct. Only thing you have to keep in mind is that the 2.5L threshold is for total income (including other income heads). If you just have income from B&P only, then yes audit does not apply. But including things like interest from Savings Account, FD etc might change the situation.

neeraj gupta

1138 Points Joined March 2017

The ITR form structure has changed a bit this year. For AY17-18 you have to use ITR3 which is equivalent to ITR4 of AY16-17.

neeraj gupta

1138 Points Joined March 2017

My apologies, I didn't read the partnership firm part. Would suggest you to repost just that question separately.

This should help you:

https://67.227.132.37/articles/income-tax-return-forms-applicable-for-a-y-2017-18-29971.asp

RAJA P M

"Do the Right Thing...!!!"

128147 Points Joined January 2015

20% of 10lakhs is 2lakhs. But, Professionals ll be shown 50% of his turn over. Then you show Rs. 500000. You can't give 50% and show it's lesser than you ll be to audit your accounts.
Dear Neeraj Sir.,
How is correct 20% as 2lakhs shown his ITR....?

Ashish Chawla

PCS

169 Points Joined October 2009

Dear Neeraj,

No apologies please. I'll reframe.

Part A: Partnership firm

I was refering to the total income i.e net profit of the firm which is 2 lakhs and below the maximum limit of 2.5 lakhs as specified in 44AB(d) and hence audit would not be applicable to the firm right? Which ITR do we need to file for the firm and what would be the due date? And if audit is still applicable Which ITR do we need to file for the firm and what will be the due date for filing the returns then?

Part B: Partners of the firm

From what I understand we have to file ITR 3 for the partners i.e individuals and what would be the due date if audit is applicable? And if audit is not applicable which ITR should the partners file and what would be the due date?

Also with regard to total income, whether it is for the firm or the individual partner?